What is a qualified transaction in the Texas Business Court?

In the last month, the Texas Business Court has issued three rulings analyzing whether plaintiffs have alleged facts sufficient to establish their claims arise from a “qualified transaction” under Texas Government Code Chapter 25A—a key hook for jurisdiction in the Business Court.

Section 25A.001(14) of the Texas Government Code defines a “qualified transaction” as a transaction “under which a party either (a) pays or receives, or is obligated to pay or is entitled to receive, consideration with an aggregative value of at least US$10 million” or “(b) lends, advances, borrows, receives, is obligated to lend or advance or is entitled to borrow or receive money or credit with an aggregate value of at least US$10 million.”¹ Tex. Gov't Code § 25A.001(14).

In two of these three recent cases, the Business Court sua sponte requested briefing on this issue, highlighting the importance for litigants to sufficiently plead jurisdictional facts regardless of whether jurisdiction in the Business Court is contested. 

This also confirms a trend evident since the Business Court opened its doors; the judges will actively inquire into whether the jurisdictional requirements for the case to be in Business Court are met.

The Texas Business Court measures the value of consideration at the time of transaction

In Atlas IDF v. Nexpoint Real Estate Partners, et al., Cause No. 25-BC018B-0004, the First Division confirmed the aggregate value of a potential “qualified transaction” is measured at the time the transaction occurs. This is distinct from the amount-in-controversy requirement of Texas Government Code § 250A.004(d), which the Court has held is measured at the time suit is filed. 

The relevant transaction in Atlas IDF arose from the sale of promissory notes, which included a principal amount and interest to be calculated at the time of payment. The First Division held consideration for such a note included the payee’s expected interest, even though the specific amount of interest could not be determined at the time the transaction occurred.

Because Nextpoint did not offer evidence contesting that Atlas valued the transaction at an aggregate value higher than the principal amount owed on the notes, the First Division credited Atlas’s uncontroverted allegation its action arose out of a qualified transaction with an aggregate value of at least US$10 million.

The First Division similarly rejected an argument that interest on promissory notes cannot be included to satisfy the Business Court’s amount-in-controversy requirement in Texas Government Code § 250A.004(d),² which excludes “interest, statutory damages, exemplary damages, penalties, attorney’s fees and court costs” (emphasis added). 

The First Division held interest accrued on a promissory note before suit is not the “type of ‘interest’” the statute excludes explaining the reference to “interest” in § 250A.004(d) “refers to only accessory items, such as statutory interest, that do not form the principal or essential part of plaintiff’s damages claims.” 

The Texas Business Court held a qualified transaction must involve a consummated agreement

In G-Force & Associates v. Bloecher et al., Cause No. 25-BC08A-0003, the Eighth Division held that it lacked jurisdiction over claims that arose from a bid process through which it was alleged one of the successful bidders could receive consideration exceeding US$10 million because the bid process did not result in a consummated agreement or contract.

In rejecting defendants’ argument that a qualified transaction could include a prospective transaction, the Eighth Division found the statutory definition of “qualified transaction” to be clear and unambiguous, demonstrating the legislature’s intent for such a transaction to involve an actually consummated agreement or contract.  

Because the bid process at issue did not result in a consummated agreement or contract, the Eighth Division held G-Force’s claims did not arise from a qualified transaction.

The Eighth Division was also unpersuaded by defendants’ argument the Texas Legislature would not have intended the Business Court to exclude tortious interference with a prospective business relationship claims from qualified transaction jurisdiction.

In rejecting this argument, the Eighth Division noted that the Texas Legislature did not expressly address tortious interference claims in Section 25A.004 and that such a claim could still be brought if it involved a continuing business relationship for which an agreement had already been consummated. 

G-Force leaves open the question of whether, and to what extent, litigants can bring tortious interference with prospective business relationship claims in the Texas Business Court.

The Texas Business Court held an agreement does not have to state the amount of consideration to be a qualified transaction

In Slant Operating v. Octane Energy Operating, Cause No. 24-BC08A-0002, the Eighth Division found Slant Operating sufficiently plead its claims arose from a qualified transaction even though the agreement at issue was silent regarding the amount of consideration for either party.

In challenging Slant Operating’s jurisdictional allegations, Octane argued the agreement at issue was not a qualified transaction because it did not state the amount of consideration in the agreement itself. The Eighth Division found this argument unpersuasive and analyzed other evidence submitted by Octane in an effort to controvert Slant Operating’s jurisdictional allegations, ultimately finding such evidence unpersuasive.

While the Eighth Division held Slant Operating met its pleading burden to allege facts sufficient to establish jurisdiction under Section 25A.004, it was careful to note that it made no final determination regarding whether the agreement actually is a qualified transaction.

This observation by the Eighth Division is an important reminder to litigants that getting past a challenge to jurisdiction at the pleading stage is not the end of a jurisdictional battle, particularly in the Business Court, which as mentioned above, frequently examines its own jurisdiction.

Conclusion

Texas’ liberal pleading standard does not give litigants a free pass to generally allege they have meet the Texas Business Court’s jurisdictional requirements. When seeking to invoke the Business Court’s jurisdiction under Section 25A.004, litigants should plead specific facts establishing that their dispute arises under a qualified transaction with an aggregate value over US$10 million.

Additionally, the rulings in the Atlas and Slant cases demonstrate that the Business Court is receptive to jurisdictional challenges and even not afraid to raise jurisdictional questions on its own.  

Given that, it would be prudent for litigants to ensure their pleadings allege facts sufficient to establish jurisdiction in the Business Court and be ready to support their allegations with evidence if controverting evidence is submitted by the opposing party.